MEXICO CITY The Reserve Bank of India may ease monetary policy as early as January, Governor Duvvuri Subbarao said on Monday, as price pressures ease in Asia's third-largest economy in the first part of next year on the back of slower growth.

Growth in India has slumped to around 5.5 percent a year, far below the 9 percent rate it was clocking before the 2008 global financial crisis, while high inflation undermines domestic consumption. Pressure has been mounting for lower interest rates, and the RBI last week put markets on notice that it may ease in the first quarter of 2013, although it did not specifiy when. It left interest rates on hold, but cut the cash reserve ratio for banks, another policy tool.

The RBI has one more meeting scheduled for 2012, in December, when Subbarao said easing was "highly improbable." He said the bank would next review policy at meetings on January 29 and in mid-March, noting that the bank's first-quarter easing guidance was based on forecasts for growth and inflation.

"If the growth and inflation trajectories play out as we expected, we would act according to our guidance," he said in an interview with Reuters, when asked about the likely timing of any new move by the RBI.

"We would assess the situation in January and try and act according to our guidance. Should the situation be different, then we will have to defer until March."

But his comments, made on the sidelines of Group of 20 meetings in Mexico City, confirm market expectations of no move by the RBI in December and suggest easing is more likely in January than March, barring surprises in growth or inflation.

Investors, companies and the government have clamoured for a cut in interest rates to boost flagging growth.

The central bank expects inflation to ease in the first quarter of 2013, from a 10-month high of 7.8 percent in September. The central bank's comfort level is for inflation of 4-5 percent.

Finance Minister P. Chidambaram told Reuters on Sunday that India's economic growth could slow to as little as 5.5 percent this fiscal year, which would be the slowest pace in a decade.

India's interest rates have been on hold since April at 8.0 percent, even as many other central banks cut rates, and they remain some of the highest in the world.

The central bank has instead cut the cash reserve ratio, the amount of deposits that banks must keep with the central bank, to its lowest since 1976, injecting more cash into the economy.

Subbarao said the central bank had yet to decide whether the easing the bank referred to in its October 30 monetary policy statement would be in the form of interest rates or the reserve ratio requirements.

"What action we take and how we calibrate it will depend on our assessment of the growth and inflation outlook at the time," he said, noting that reserve requirements have more impact on liquidity whereas policy rates signalled the RBI's anti-inflation stance.

Leaving the policy repo rate on hold was in line with forecasts in a Reuters poll. But expectations of a rate cut had grown after Chidambaram outlined a plan to cut the country's hefty fiscal deficit, which is a concern of the central bank.

Subbarao said the RBI did not have pre-conditions for policy easing and said it was not necessary to see budget figures for next fiscal year before acting, noting that these would not be available by the January policy meeting.

"It's important that the government's fiscal policy and the RBI's monetary policy act synergistically. So government has an agenda of reforms, they have implemented some of them, they have announced that they will implement some more reforms, so as those reforms play out it will provide for monetary policy to ease," he said.

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